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OPINION

Dodging the question

Dodging the question
April 22, 2016
Dodging the question

We’ve also spoken regularly about the best ways of leaving a legacy, and inheritance tax (IHT) planning is another huge consideration for many of our readers. We’ve looked at the dos and don’t of putting wills together, and ways in which you can avoid handing too much of your hard won cash to the taxman rather than you family. It’s an issue we’ve touched on again in this week’s magazine on page 22. And it’s something that’s a key feature of investing in Aim shares, many of which, thanks to a tax break called business property relief (BPR), are free from inheritance tax.

That said, it’s true to say that you shouldn’t let the tax tail wag the investment dog. Readers should pay particular attention to that advice when in investing in Aim shares, the most speculative of which do have a habit of blowing up – tax relief isn’t much good if there’s nothing left to pass on. Of course, plenty of qualifying Aim shares do not fit this description – and a carefully selected portfolio of Aim shares will serve to both protect and grow capital and, ultimately, deliver the IHT benefits, too. You’ll find plenty quality Aim shares in our review of the junior market’s 100 largest companies, published this week and next.

There is one complication: there is no official list which comprehensively confirms which shares do in fact qualify for BPR. Two Investors Chronicle readers, both members of the House of Lords, have specifically asked HMRC why they won’t publish this information. HMRC responded that it can’t publish a list because it "may become out of date quickly raising the risk that relief is claimed incorrectly”, for instance if a company moved to the main list, or the nature of its business changed. Surely, though, without a list of qualifying companies approved by HMRC the risk of incorrectly claiming relief is greater still. I suspect that the real reason that they do not provide this information is that, although the rules for BPR qualification are relatively straightforward, it does require a substantial amount of work to ensure it remains up to date.

Help is at hand elsewhere, though. For those who want to access Aim’s IHT benefits in a hassle-free manner, a number of firms – notably Charles Stanley and Fundamental - offer off-the-shelf IHT portfolio services that have proved strong performers over the years. And for self-directed stockpickers, our friends at Investor’s Champion will, for a small fee, check a share’s BPR qualifying status – and if they can do it, surely it’s not too much of a stretch for HMRC to do so, too.